Appeal court sides with Ford dealers

“This is important because dealers are behind the eight ball from the beginning of their relationship with the manufacturer due to skewed franchise contracts that are written by, and heavily weighted in favour of, the manufacturer.”

The Toronto Star
September 1, 2000

Appeal court sides with Ford dealers
Association allowed to take auto giant to trial
Tony Van Alphen

Ford dealers will finally have their day in court against the auto maker.

The Ontario Court of Appeal has dismissed a motion by Ford Motor Co. of Canada Ltd. that would have allowed the company to appeal a lower court ruling allowing dealers class-action status.

Ford dealers claim the auto giant should be liable for damages because they could be hurt financially by a company decision last fall to turn all Lincoln Mercury outlets into Ford stores.

A panel of three judges did not give reasons for the decision earlier this week, but they ordered Ford to pay the legal costs of the dealers.

Sonja Falkenberg, director of the Canadian Ford Dealers Association, said yesterday the decision represents one of the first times that a group of franchisees has been successful in taking such a case to trial.

“Whether or not we are successful at trial, the fact is, car dealers are a force to be reckoned with,” Falkenberg said.

“This is important because dealers are behind the eight ball from the beginning of their relationship with the manufacturer due to skewed franchise contracts that are written by, and heavily weighted in favour of, the manufacturer.”

Ford spokesperson Lauren More said the company, which has 565 dealers, expects to win at trial.

“We are confident that outcome will be favourable to Ford,” More said.

Oakville-based Ford of Canada turned 124 Lincoln Mercury dealers into Ford or Ford Lincoln stores in an effort to promote brand awareness last fall. Many Ford dealers nearby said the move would eventually reduce their business.

Four Ford dealers had initiated legal action a few months earlier, arguing the manufacturer would be breaching their franchise agreements since it allowed new Ford outlets within 15 kilometres of existing stores without market research justifying the move.

The dealers sought class-action status on behalf of all dealerships so they could seek a declaration at trial that Ford breached its contract by “rebranding” stores.

A favourable decision for dealers at trial would allow them to pursue damages without needing to prove Ford’s liability in each case.

A motions judge rejected the dealers’ original request, but a divisional court overturned the decision.

That court said a test case involving a few dealers would determine common issues if the parties would bind themselves to a decision.

Ford countered that it shouldn’t be bound by a decision that could apply to other dealers later.

Ford lawyers also argued there was no claim for damages and no interest in litigation from dealers except the four plaintiffs.

Ford said a number of procedural steps need to be taken before the case reaches trial.

Falkenberg said her group hopes to get a trial date for late next year or early 2001.


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